A blog article originally published by the Legal Compliance Association in March 2017
In order to be effective, the compliance team (whether that is the COLP and COFA working on their own, or a committee selected from members of the firm, or a team of compliance specialists) must compliment the business in which it operates. This in turn requires everyone in the business to work in a supportive manner with the compliance team rather than fighting against them or not involving them in decision-making. Easy for me to say! How is this achieved in practice?
My reflections on what’s needed in order for the compliance team to be effective are based on my experiences over the past couple of decades. I have witnessed a noticeable change in attitude to regulatory compliance and a revolution-like transformation in firms’ attitudes to the business-end of their work, As I suggested in a previous column on this website, there’s a need to recognise that being a good lawyer is not all that’s needed to survive and prosper in the legal services industry these days. Amongst other things, it is necessary to acknowledge that a good lawyer must work in a compliant way amongst like-minded colleagues.
Why? The bottom line, or the persuasive argument for compliance, is actually very simple. Without a commitment to understanding and upholding regulatory compliance standards, the firm will quickly lose favour with the SRA with consequences for the ongoing survival of the business. The firm may find its authorised status is subject to scrutiny. This in turn may have financial repercussions for the owners of the business who can find themselves unable to deliver services to clients. This means that compliance is good for business. Who could argue anything else?
Of course, reaching this position of harmony between the compliance team and the rest of the firm, does not simply happen because an individual is given a compliance title and a desk within the building. A lot of work is needed in order to make the compliance function an effective one.
Here are some of my reflections on how this happens:
- It is necessary to be very clear about the purpose of compliance
Perhaps more specifically, it is necessary to explain the need to be compliant with regulatory standards in language that is easy to relate to (hint: using SRA-speak rarely appeals to anyone not least partners who will need to budget for compliance and colleagues who may feel it is a distraction from their day jobs). The message can be conveyed quite simply: your firm is only able to open its doors, and invite paying clients over the threshold, whilst it is regarded as a safe harbour for legal services. You need to comply with regulatory standards to stay in business. - The compliance team does not own the responsibility for achieving regulatory standards
The role of the compliance team is to facilitate the right behaviours within the firm which make this happen. Ultimately, however, it is the owners of the business who own responsibility for compliance. Let’s face it, the owners have most to lose (both financially and in terms of their reputation) if things go wrong so why wouldn’t they accept the need to promote a compliance culture within their business. It’s one less thing they need to worry about if they are satisfied that they can rely on their employees to do the right thing. - The owners of the business must be seen to be behaving properly
It’s risky to suppose that a ‘do as I say not as I do’ attitude will work. The owners need to lead on this topic by example. This requires a commitment to such behaviours as zero tolerance to the lowering of standards, not turning a blind eye to the colleagues who are mavericks or too difficult to manage, supporting colleagues who may have ethical dilemmas, encouraging openness and accountability, conducting arguments about compliance behind closed doors and out of earshot of employees, plus being prepared to acknowledge that there may be regulatory risks attached to commercial decisions - The compliance team must have a role in decision-making
Of course, all businesses must make commercial decisions, take strategic risks, consider business plans and profitability every day. Law firms are no exception. Law firm owners, however, do have to also consider whether a decision has a regulatory twist or repercussion, so doesn’t it make sense for the compliance team to be privy to this level of decision-making and to be able to add to the making of informed choices through a discussion of regulatory impact. This is not to say that the compliance team is the decision maker; rather that they should add their subject knowledge to the deliberations. An effective compliance team will be used by the firm in this way and will have access to the most senior decision-makers at the right time in the decision-making process. - There must be an acknowledgement that compliance plays a central role in the firm’s continuing survival and is not a backroom service
This is a change in law firm dynamics for most practitioners. It is not unusual for compliance to be seen as a drain on finances and resources, a necessary evil, even a team that stifles growth. In fact, an effective compliance team serves a completely opposite purpose. By facilitating compliance with regulatory standards, the team is encouraging and supporting the longevity and continuing success of the firm. This means that the personnel employed in the team must have soft skills as well as technical know-how. They must be ‘go to’ and approachable. They must be able to influence people and be good communicators. They should position themselves in such a way that they will always know what’s happening in the firm
An effective compliance team will demonstrate its value to the business. It is created to ensure that the working environment is a safe place in which colleagues can be employed, protected from regulatory censure and able to work in a way that promotes profitability and sustainability. Team work is needed to make this happen, after all, and to end this article with a misquote, no compliance officer is an island!